US-China Talks Yield Little Result as Inflation Concerns Rise

The US-China talks have yielded little result, and investors are focusing on rising inflation concerns. US durable goods orders were unchanged in August from July, but still up +8.4% year-over-year. Petrol prices have breached a +50% rise since the Trump administration's conflict with Iran began, while diesel prices are now up +67%. The University of Michigan's September survey of consumer sentiment shows a significant decline in expectations, with year-ahead inflation expectations jumping to 4.6%, the highest reading since June.

Financial markets are betting on another Fed rate hike at its October meeting, despite falling sentiment. China has initiated big holiday liquidity support, injecting up to ¥1 trillion into their banking system via reverse repos. The UST 10-year yield is now at 5.17%, while the Japanese 10-year bond yield is at a generational high of 3.08%. The NZ Government 10-year bond rate is also rising, now at 5.14%.

The US dollar is gaining strength against major currencies, with the Kiwi dollar down -50 bps for the week and the Aussie dollar up +3 bps from Friday. Bitcoin has started the day at US$83,934, down a minor -0.2% from yesterday but up a net +3.6% from a week ago.